The Overconfidence Effect

What makes the overconfidence effect so prevalent and its effect so confounding is that it is not driven by incentives, it is raw and innate. And it's not counterbalanced by the opposite effect "under confidence effect is more pronounced in men, women tend not to overestimate their knowledge and abilities. Overconfidence and positive illusions can lead people to behave in ways that are arrogant, careless, and self-centered (Anderson, Srivastava, Beer, Spataro, & Chatman, 2006; Banmeister, Campbell, Krueger, & Vohs, 2003). Those who engage in the most self-serving reasoning are also more likely to cheat on tasks, in part because they are better at justifying the behavior to themselves that are others (von Hippel, Lakin, & Shakarchi, 2005).

According to one theory, overprecision springs from the desire to relieve internal dissonance, or a state of tension regarding the right decision or course of action. People in a stressful state of tension feel motivated to relieve this dissonance, even if this requires them to change what they believe. There are psychological and social forces that push us toward unwarranted self-assurance. But can we be blamed for wanting to believe that we know what is true and false? If we find out that we were mistaken about something, we move in that instant from the old belief to a new belief. As a consequence, we almost never have the experience of believing something we know to be false. Instead, believing that we are right about everything all of the time becomes the usual state of affairs (Schulz, 2010). No wonder, then , that overprecision is so

Sometimes we are too cautious and too modest, reporting ourselves to be worse than we actually are or worse than others to be worse than we actually are or worse than others on a given task, when in fact we are not. These instances are of great scientific interest, as they help us understand why people are overconfident in other circumstances. From a practical standpoint, they help us anticipate when we will likely underestimate ourselves and also help us identify times when we might forgo opportunities at which we would succeed if only we had the courage to try.
Harvard Review Reading: Bottlenecks and Evidence based management The most important step in unclogging decision making bottlenecks is assigning clear roles and responsibilities. Good decision makers recognize which decisions really matter to performance. They think through who should recommend a particular path, who needs to agree, who should have input, who has the ultimate responsibility for making the decision, and who is accountable for follow-through. They make the process a routine. The result: better coordination and quicker response times. Companies have devised a number of methods to clarify decision roles and assign responsibilities. RAPID stands for the primary roles in decision-making process: recommend, agree, perform, input and decide the